BFC (BABY FINANCIAL CRISIS)

A colleague of my brother's at the CBA has just coined the phrase Baby Financial Crisis - BFC. It's a little tongue in cheek but it's worth seriously considering the notion. There has been much talk of the potential for a 'W' shaped recession. The world has gone through a period of significant upheaval and there has been a great deal of wall paper 'printed' to paste over the cracks. The fact remains however that a great deal of debt - much of it toxic remains to be unwound. The problems in Dubai have clearly illustrated this fact. It remains to be seen whether the issues there cause others around the world to surface.

I still believe the RBA will go ahead with another lift in rates tomorrow of 25 points. Futures this morning are unwinding a bit of their Friday afternoon rally so it seems they are still expecting the tightening too. The situation in Dubai will likely bolster the argument for a pause however at 3.75% until growth in Australia and the world is clearly sustainable.